Vitiating elements - Duress and undue influence

Learning Outcomes

After studying this article, you will be able to:

• Identify and define duress and undue influence as vitiating elements in contract law.
• Distinguish between different types of duress and categories of undue influence.
• Apply the legal tests for each concept to factual scenarios.
• Recognize the remedies and limitations available when a contract is voidable for duress or undue influence.

SQE1 Syllabus

For SQE1, you are required to understand how duress and undue influence can affect the validity of a contract. Focus your revision on:

• the definition and types of duress (physical, economic)
• the elements required to establish duress
• the distinction between actual and presumed undue influence
• the legal tests for undue influence and the shifting burden of proof
• the remedies available for contracts voidable due to duress or undue influence, and the limitations on rescission
• how to apply these principles to SQE1-style MCQs and practical scenarios

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are the essential elements required to establish economic duress in contract law?
2. In which types of relationships is undue influence presumed, and what must the defendant do to rebut this presumption?
3. What is the primary remedy for a contract entered into under duress or undue influence, and what are the main bars to this remedy?
4. How does the legal test for duress differ from that for undue influence?

Introduction

Contracts require genuine, voluntary consent. If a party’s consent is undermined by improper pressure or abuse of trust, the contract may be voidable. Duress and undue influence are two key vitiating elements that can render a contract unenforceable at the option of the victim. This article explains the definitions, legal tests, and remedies for duress and undue influence, with a focus on what you need to know for the SQE1 exam.

Duress

Duress arises where one party is forced into a contract by illegitimate pressure, depriving them of free consent. If duress is proven, the contract is voidable by the victim.

Key Term: duress
Illegitimate pressure (such as threats of harm or economic pressure) that induces a party to enter into a contract, making the contract voidable.

Types of Duress

Duress can take several forms:

• Physical duress: Threats of violence or actual harm to the person or their family.
• Duress to goods: Threats to damage or withhold property.
• Economic duress: Unlawful or illegitimate financial pressure, often in commercial settings.

Key Term: economic duress
Illegitimate financial or commercial pressure that leaves the victim with no practical alternative but to agree, making the contract voidable.

Elements of Duress

To establish duress, the following must be shown:

1. Illegitimate pressure: The pressure applied must be improper (e.g., threats to breach contract, commit a tort, or a crime).
2. Causation: The pressure must be a significant reason for entering the contract.
3. No practical alternative: The victim had no reasonable way to avoid the contract except by agreeing.

Worked Example 1.1

A supplier threatens to stop delivering essential parts to a manufacturer unless the manufacturer agrees to pay a higher price, knowing this would halt the manufacturer's business. The manufacturer reluctantly agrees. Is this contract voidable for duress?

Answer: Yes, if the supplier’s threat was illegitimate (e.g., threatening to breach contract without justification), left the manufacturer with no practical alternative, and was a significant reason for agreeing, this is economic duress. The contract is voidable at the manufacturer’s option.

Exam Warning

In SQE1 questions, distinguish between hard commercial bargaining (which is lawful) and illegitimate threats. Not all pressure is duress—only improper threats or conduct.

Undue Influence

Undue influence occurs when one party abuses a position of trust or authority to obtain the other’s agreement, undermining their free will. This also makes the contract voidable.

Key Term: undue influence
Improper use of a position of trust or confidence to persuade another to enter into a contract, making the contract voidable.

Categories of Undue Influence

There are two main categories:

• Actual undue influence: Proven by direct evidence of improper pressure or manipulation.
• Presumed undue influence: Arises in certain relationships or where facts show trust and confidence, shifting the burden to the influencer to prove the transaction was entered into freely.

Key Term: actual undue influence
Direct evidence shows that improper influence was exerted to procure the contract.

Key Term: presumed undue influence
The law presumes influence in certain relationships or where trust and confidence is shown, unless rebutted by the influencer.

Relationships Where Influence Is Presumed

Certain relationships automatically give rise to a presumption of undue influence, including:

• Parent and child
• Guardian and ward
• Solicitor and client
• Doctor and patient
• Trustee and beneficiary
• Religious adviser and follower

Other relationships (e.g., husband and wife, adult child and parent, friends) may also give rise to a presumption if facts show trust and confidence.

Legal Test for Presumed Undue Influence

To establish presumed undue influence, the claimant must show:

1. A relationship of trust and confidence.
2. A transaction that is not readily explained by ordinary motives (i.e., it calls for explanation or is manifestly disadvantageous).

If these are shown, the burden shifts to the defendant to prove the transaction was entered into freely, often by showing the victim received independent advice.

Worked Example 1.2

A bank manager arranges for an elderly client to guarantee her son’s business loan, without advising her to seek independent legal advice. The client trusts the manager and her son. The business fails, and the bank seeks to enforce the guarantee. Can the client set aside the guarantee for undue influence?

Answer: Yes. The relationship of trust and confidence is present, and the transaction (guaranteeing a large loan) is not readily explained by ordinary motives. The bank failed to ensure independent advice was given, so the presumption of undue influence is not rebutted. The guarantee is voidable.

Revision Tip

For SQE1, remember: in presumed undue influence, the burden of proof shifts to the influencer once a relationship of trust and a suspicious transaction are shown.

Remedies and Bars to Relief

If duress or undue influence is proven, the contract is voidable. The main remedy is rescission—setting aside the contract and restoring the parties to their pre-contract positions.

Key Term: rescission
The remedy that sets aside a voidable contract and restores the parties, as far as possible, to their original positions.

However, rescission may be barred if:

• The victim affirms the contract after the pressure or influence has ended.
• There is undue delay in seeking relief.
• Restitution is impossible (e.g., the subject matter cannot be returned).
• Third-party rights have intervened (e.g., the property has been sold to a bona fide purchaser).

Worked Example 1.3

After being pressured by her nephew, Mrs. Green transfers her house to him. She later seeks to rescind the transfer, but the nephew has already sold the house to an innocent third party. Can Mrs. Green recover her house?

Answer: No. Although the contract was voidable for undue influence, rescission is barred because the house has been sold to a bona fide purchaser. Mrs. Green may have a claim for damages against her nephew, but cannot recover the house.

Distinguishing Duress and Undue Influence

Key Point Checklist

This article has covered the following key knowledge points:

• Duress is illegitimate pressure (physical, goods, or economic) that vitiates consent and makes a contract voidable.
• Economic duress requires illegitimate pressure, causation, and no practical alternative.
• Undue influence is improper use of trust or authority to procure a contract, also making it voidable.
• Actual undue influence is proven by direct evidence; presumed undue influence arises in certain relationships or where trust and confidence is shown.
• In presumed undue influence, the burden shifts to the influencer to show the transaction was entered into freely.
• The main remedy for duress or undue influence is rescission, but this may be barred by affirmation, delay, impossibility, or third-party rights.
• Duress and undue influence are distinct but both undermine genuine consent and render contracts voidable.

Key Terms and Concepts

• duress
• economic duress
• undue influence
• actual undue influence
• presumed undue influence
• rescission